×
×
homepage logo

DAVID KRUSE

By Staff | May 28, 2010

I put effort into defending livestock industries from attacks from animal activist vegan promoting organizations like the Humane Society of the United States and PETA and then I put effort into defending the ethanol industry from hypocritical livestock groups who are anti-ethanol because they want cheap corn.

I have a financial interest in the beef industry and a long family history of livestock production. I am also a corn producer who has invested in the ethanol industry. Where I live, our feedlots and ethanol investments are fully integrated.

40 percent of our feedlot rations are distiller’s dried grains, which is competitively priced feed. Most every ethanol opponent seems to forget that a third of a bushel of corn that goes into an ethanol plant comes out as an excellent feedstuff called DDG.

The adoption of new feedlot technology utilizing monoslope bedded barns and the availability of DDG give this type of Corn Belt feedlot the most competitive cost of gain in the USA.

That’s what bothers feedlots in the Southern Plains. They used to be the low-cost beef producer and since the arrival of the ethanol industry, have been displaced as the low cost producer by Corn Belt feedlots near ethanol plants.

The pork industry can not utilize DDG in rations to the extent that beef animals can, so it doesn’t like the competition for corn coming from the ethanol industry, either.

While the National Pork Producers Council and National Cattlemens Beef Association attack the ethanol blender’s credit and tariff on the basis of opposing subsidies, the Southern Plains feedlot industry was built on corn subsidies.

They directly and indirectly benefited from USDA corn subsidies that gave farmers the financial ability to sustain a market, depressing corn surplus so that feedlots could buy corn below the cost of production.

Corn subsidies depressed the price of corn so that commercial livestock operations could use cheap feed to build scale.

When the large commercial operations, represented by NPPC or NCBA, attack ethanol subsidies, arguing that ethanol should stand on its own, it’s a hypocritical argument coming from an industry that was built on corn subsidies.

Although there has never been an actual shortage of corn, as all endusers have been well supplied by productive corn producers, the price of corn did rise above the cost of production to give corn producers the incentive to produce more corn.

Corn producers responded to the market, not only supplying all endusers, including the ethanol industry, but building carryover stocks as well. The price of corn rose so that farm subsidies were minimalized as the farm safety net of subsidies was no longer active.

Taxpayers gave petroleum blenders a 43-cent credit to blend cheaper ethanol. By doing so, they paid less in corn subsidies to farmers because those farmers were now paid by the market.

It is in the national interest to reduce dependence on foreign oil and shift toward renewable energy. While those goals may be patriotic, the oil companies would not use renewable fuel unless paid to include it in fuel blends.

Ethanol is cheaper than gasoline, more so with the blender’s credit, so consumers save money on E-blended fuel, too. As a result of the ethanol industry improving the price of corn, taxpayers pay fewer corn subsidies to farmers.

Ethanol reduces the environmental and security risk of the U.S. fuel supply. If the U.S. taxpayer chose to subsidize something, would they subsidize cheap meat through corn subsidies or would they provide the financial incentive to achieve U.S. energy independence?

Corporate livestock industries that criticize ethanol subsidies are only looking out for themselves. They had it good. The government was creating gluts of corn in the Midwest that they could buy below the cost of production, rail to the Southern Plains or feed to corporate hogs. The way it was, benefited Smithfield Foods, Tyson, Cargill, Cactus Feedyards and all the integrated meat producers.

NPPC and NCBA are doing everything that they can to undermine U.S. energy policy relative to biofuels for self interest. The ethanol industry competes with them for corn. And now that China has entered the U.S. corn market. China subsidizes its corn producers at such a high price, $7-8/bushel, that they can buy corn cheaper here and ship it to China at a profit.

Will NPPC and NCBA now attack Chinese corn subsidies and argue to ban corn exports to China? That makes every bit as much sense as their attack on ethanol. We just had the worst recession since the Great Depression with the real unemployment rate up near 17 percent and NPPC and NCBA would have everyone think that ethanol and not the recession, was the cause of their cyclic losses brought on primarily by pork industry over-expansion.

I’ll let the Ethanol Monitor editor, Tom Waterman, take it away with his conclusion, “Frankly, the meat industry is entitled to make a profit. However, it wants ethanol to disappear, so corn drops to $1.50 or $2 per bushel so they can generate even bigger profits.

“They won’t admit that is the goal, but clearly, they oppose any use for corn other than as feed. If they could stop exports of corn, they would. Meanwhile, the ethanol industry moves forward and continues to contribute jobs, steps toward energy independence and a cleaner environment.

“Farmers continue to produce enough corn to feed everyone, supply domestic renewable fuel, and always have a surplus, just in case.

“The meat industry has become more Wall Street instead of aligned with its traditions rooted on Main Street.”

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

Please Enter Your Facebook App ID. Required for FB Comments. Click here for FB Comments Settings page